Superior Gold Inc.

Thank you, Nez [ph]. Good morning, everyone and thank you for joining us to discuss Superior Gold’s fourth quarter and year-end 2021 results.

As a reminder, please refer to Slide 2 of our presentation, which is posted on our website to view our cautionary language regarding forward-looking statements. In addition, please note that all amounts discuss are in U.S dollars unless otherwise noted.

Jumping to the next slide to -- joining me today on the call -- sorry, on the call is Paul Olmsted, our CFO; Russell Cole, VP Operations and Mike McAllister, our VP, Investor Relations. Just going through a few investment highlights.

Firstly, Plutonic and Superior Gold is a world class operating mine with established infrastructure that includes significant licensed milling capacity. The business has a clear and concise optimization and expansion plan, and I'll allude to that a little bit later in the presentation and is endowed with a significant mineral resource base with demonstrated exploration upside.

Finally, one of the most compelling attributes is the re-rate opportunity we represent compared to our peers. In order to achieve a re-rate, our growth strategy target to deliver on three goals.

The first one is to deliver a safe, stable and predictable operation, producing between 70,000 and 85,000 ounces per annum, which has now been delivered in our 2021 results. An operational scale that reduced all-in sustaining costs by increasing production to circa 100,000 ounces per annum with the current 1.8 million tons per annum operating processing plant and then towards 150,000 ounces per annum by restarting the currently shutdown 1.2 million tons per annum milling circuit.

This is expected to be achieved by increasing oil production from Superior Gold's underground open pit mines augmented by potential external sources as well. Lastly, we will continue to invest smartly in the -- on exploration of known high potential targets to expand the resource and reserve as well as our life of mine.

I will explain in more detail how we plan to deliver these goals. Superior Gold has got a very well-defined growth strategy.

And as I said before, we targeting to deliver on three goals. Firstly, the goal is targeted to put in place a strong base for further growth, therefore delivering a safe, stable and predictable operation as I say between 70,000 and 85,000 ounces.

In this first phase, we started working to reestablish steady state production from the underground mine and are encouraged to see it return to a state of improving positive cash flow from 2021. In addition, the near mine resource extension drilling and mineral exploration that started last year has, as predicted, provided future mining fronts for stable cost-effective feed to the 1.8 million tons per annum mill.

The second goal is targeted to deliver an operation with scale aging towards 150,000 ounces at [indiscernible] at reduced costs and improved cash flow, while strengthening the balance sheet. Goal two is planned to be achieved in two phases.

The first phase is set to see production increasing towards 100,000 ounces per annum by supplementing underground fleet with open pit production from a number of near-mill, past-producing open pit projects including Plutonic East, which would commence on schedule in the second quarter of 2021. Moving on to Perch, in the fourth quarter of 2021 as well as now Main Pit Deeps in the second quarter of 2022.

In addition, we have optionality into Hermes and Hermes South in the short-term. The next phase is planned to increase towards 150,000 ounces per annum.

Here we plan to recommission our second mill that is currently on care and maintenance. New sources of feed might come from exploration on our existing properties, and/or from several other sources along the Plutonic Marymia Gold Belt.

The third goal consists of delivering on the exploration of high -- of known high potential targeted areas. This is the potential for a new discovery as we invest in exploration at Plutonic.

We have certainly been very encouraged by our recent drilling results, which includes a third drill rig on the property dedicated to opening new mining fronts and one may expect regular updates on exploration as well as actively moving forward with a surface drilling strategy, specifically now in 2022. It's important at this juncture to share how we are tracking to deliver on the strategy.

Firstly, Superior Gold has delivered the first goal. In 2021, gold production exceeded our upper-level guidance at 77,000 ounces delivered without any loss of productivity to COVID.

In fact, we have had no COVID cases on site since the pandemic started. The underground production increased over the year and Q4 underground mining rate of circa 900,000 tons per annum was achieved.

We now move on to goal two in 2022. The first phase, we will target to increase the quality of open pit or by executing on an early entry opportunity in the Main Pit.

We call that Main Pit Deeps that will happen once purchase complete in the second quarter of 2022. This will see open pit ore grade increase towards 2.5 grams per ton from circa 0.7 grams per ton.

The underground mine will expand its operations into new areas providing up to 30% of total ore from underground from new areas. The underground is scheduled to deliver 900,000 tons in 2022.

That's up from 835,000 ounces delivered in 2021 at an exit rate of 1 million tons per annum in the fourth quarter of 2022. The operational plan for 2022 is therefore designed to edge towards delivering the first phase in delivering operations of scale.

We expect to announce the updated resource and reserve as well as the life of mine late in the first quarter, early second quarter of 2022, which will form the basis on which the next phases are expected to be delivered. Moving on to safety of our people, and just reaffirming that is the top priority of our business.

Above everything the health and safety of our people remains our top priority. We continue to successfully operate through the COVID-19 pandemic and adhere to the strict measures that we put in place to mitigate this threat.

In order to comply with recent legislation, all employees and contractors are expected to be fully vaccinated by February 1. We are also putting a lot of effort into introducing a safety culture that's committed to the workplace to workplace free of incidents.

The People Safety and Risk Transformation program commenced in October and will focus on safety leadership, critical control management, i.e., job safety -- sorry on the job safety, process safety and material risks. Now moving on to our fourth quarter highlights.

These highlights include production of 20,983 ounces of gold in Q4 with sales of 21,143 ounces of gold at a realized price of $1,786 per ounce. The total cash costs were $1,290 per ounce sold, and the all-in sustaining costs were $1,416 per ounce sold.

That's down 16% and 18%, respectively, on the fourth quarter of 2020, which is testament to the improved efficiencies and realized cost benefits being implemented. For a fourth straight quarter, we generated significant cash flow from operations of $8.5 million and exited the quarter with a robot cash position of $23.8 million.

Operationally, we continue to achieve our targeted stope grade of 3 grams per ton with our full year 2021 stope grade at 3.2 grams per ton. This is an improvement of 10% relative to the full year of 2020.

Our mill grade for the fourth quarter in 2021 increased by 19.9% over the comparable period in 2020. For the full year 2021, Our mill grade increased by 30% over 2020, reflecting the impact of both higher underground grades and replacing low grade legacy stockpile with higher grade open pit feed.

The higher grade also has led to improved recoveries in 2021 with annual recoveries of 83% versus 83% -- sorry, 87% versus 83% for the same period in 2020. An improved understanding of the geology and mineralization at Plutonic has led to establishing two new mining fronts as demonstrated by the exiting -- exciting new drill results at the Baltic Gap and Baltic Deeps mining front and at the Western mining front as well as Indian Access.

All of these are in close proximity to existing development and infrastructure. Moving on to the next slide.

As we mentioned, the Plutonic Gold operations produced 20,983 ounces of gold in the fourth quarter as compared to 15,838 ounces of gold in the same period in 2020. The increase is largely a result of increased contribution of higher-grade stope material that reduced the proportion of lower grade legacy stockpiles being milled.

Throughput rates to increase as there was an increase in availability of higher-grade surface material for milling from the Plutonic East and Perch open pits. In addition, an enhanced understanding of the geology and mineralization at Plutonic has improved our ability to predict the spatial positioning of the ore more accurately, allowing for better, more cost-effective stope design, scheduling and planning.

Moving on, we've seen a steady improvement in results following the operational improvements we've implemented at Plutonic. Of the quarterly production, overall quarterly production has increased by 38% from a low in the second quarter of 2020, highlighting the importance of targeting higher mine stope grades, and its impact on our overall cash generation ability at Plutonic.

In addition, our net cash position has improved by $6.5 million in the fourth quarter to $23.8 million, a significant improvement from the end of the fourth quarter in 2020, reflecting improved operation -- operating performance and the repayment in full of our gold loan at the end of the second quarter in 2021. I'm now going to hand over to Paul Olmsted, our Chief Financial Officer to discuss our financial results for the quarter.

Thanks, Chris. During the fourth quarter, revenue totaled $37.8 million from the sale of 21,143 ounces of gold, an increase of $10.4 million from $27.4 million from the sale of 15,855 ounces of gold in the fourth quarter of 2020.

Gold revenues were higher as a result of the 5,288 more ounces being sold and a marginal increase in the realized gold price to 1,000 -- 1,786 from 1,726 per ounce. Cost of sales were $29.4 million for the fourth quarter of 2021, an increase of $2.3 million from $27.1 million for the fourth quarter of 2020.

This increase was due to the higher mining costs from the addition of 1.7 million of surface mining costs from the mining of Plutonic East and the Perch open pits, which began in the second quarter of 2021. And that was partially offset by a reallocation of 1.2 million of camp and flight costs from the mining category into site services category to allow more effective site reporting.

Also due to the variance in the change in the inventory category, this change in inventory of 1.2 million in the 3 months ended December 31, 2020 reflected decreases in stockpile inventory from the Plutonic East and Perch open pits, and an increase in the gold and circuit inventory with the higher throughput for the quarter. Adjusted net income for the fourth quarter of 2021 amounted to $3.9 million or $0.03 per share, compared to an adjusted net loss of $749,000, or $0.01 per share in the fourth quarter of 2020, and that was primarily due to higher operating earnings in the current period.

During the fourth quarter, cash from operating activities before working capital changes was $8.3 million, a $10.2 million increase over cash from operating activities for the fourth quarter of 2020. The increase in cash generated from operating activities was predominantly a result of stronger operating earnings in the fourth quarter in comparison to the fourth quarter of 2020 and as well as the repayment of the gold loan in the second quarter of 2021.

As you can see on the chart, the -- on the right, the highlights that in the third -- fourth quarter, cash from operations before working capital changes and before the repayment of the gold loan increased significantly by $16.3 million compared to the same period in 2020. As at quarter end, as Chris mentioned, we had cash of $23.8 million at the end of the year.

A particular note is the fact that the gold loan was fully repaid at the end of the second quarter of 2021 and the company currently has zero term debt. As a result of the repayment of the gold loan and improved performance year-to-date, our working capital position has increased to $10.4 million over the December 2020 year-end position, a significant improvement.

I will now turn the call back to Chris to continue with the rest of the presentation.

Thank you, Paul. Now moving on to the production guidance for 2022.

The production guidance for this year is between 80,000 and 90,000 ounces, and we anticipate that the first quarter will be the weakest in 2022 due to a planned 14-day maintenance shutdown on the SAG mill to perform preventative maintenance on the foundations and rotating equipment in anticipation of higher throughput rates in the future. The company aims to increase the annualized production rate to 100,000 ounces in the second half of 2022.

Our all-in sustaining costs is guided to range between $1,450 and $1,600 per ounce. We recognize that this range is above the Q4 2021 all-in sustaining costs of $1,417.

However, $1 per ounce, however, we have conservatively guided our range to 2022 considering potential inflation impact as well as potential disruptions from COVID-19 as Western Australia now begins to loosen restrictions and open up its borders. Our exploration expenditures range has increased as we ramp up our exploration efforts in new open pit targets as well as continue with our underground programs.

Now moving on to the underground optimization, we are currently focusing on unlocking value in the underground through production growth, margin optimization and systematic exploration. First, we are focused on optimizing our grade from the underground.

An average stope grade of better than 3 grams per ton is our target to better spatial prediction of ore. And as I said, we are achieving these targets.

In mining operations, we've revitalized the underground fleet with the additional two new trucks and two loaders and this recapitalization process will continue in 2022. At the mill, which operates very well, the recommissioning of the Gravity circuit has had a positive impact on our recoveries, and as I said, has improved from circa 83%, 84% the previous year to 87% in 2021.

Finally, the addition of a third underground drill rig that has dedicated expanding into the new mining fronts has resulted in some very promising results recently and I will discuss this in more detail shortly. Considering the open pits to propel production to 100,000 ounces, it's important to note that during second quarter, open pit mining commenced at Plutonic East in -- on schedule.

Perch, which is currently in development has been optimized during the recent opportunity to review and these benefits are expected to be realized in Q3 and Q4 of FY 22 -- sorry '21. Production from these open pits plus longer term, the Main Pit Push-Back along with operational improvements from the underground is expected to increase production and return Plutonic all operations to state of significant free cash flow generation.

Moving on to historic step-out drilling highlights. This slide is a reminder that there are significant intercepts in close proximity to the existing infrastructure as well as all grade intercepts located 1 kilometer outside the mineralized mafic.

It should be clear that the limits of mineralization have yet to be found and continued investment into this exploration of Plutonic is warranted. From that point of view, our average investment in exploration last year was between $40 and $50 per ounce produced, that’s moved to between $90 and $100 per ounce in 2022 as we added surface drilling into that as well.

Insofar as exploration program is concerned, in the near-term our focus on the underground is on exploring and developing into new mining fronts. We believe that the two new mining fronts being the Western Mining front and the Baltic Gap will be key in improving the profitability of this operation in the near-term and into the future.

We have recently announced drilling results from these three main areas, Baltic West, Indian West and Baltic Gap, which is highlighted in the following slides for you. On August 17, we provided an exploration update in the third quarter withdrawal results from the Western mining fronts.

The results were highlighted by a drill hole UDD24141 and intersected 42.2 grams per ton over 5.6 meters and also 17.7 grams per ton over 6.4 meters elsewhere. This new mining front now extends an estimated 1.6 kilometers by 60 meters outside the current mineral resource envelope.

As a reminder, the Western mining front is directly adjacent to existing underground infrastructure, thus requiring minimum capital to develop into this area. The extension of existing mineral resources are key components of our current strategy to expand into new mining fronts and improve our mining grades, productivity and reduce the reliance on remnant mining.

In 2022, our remnant mining, which was 100% previously, will move to only 70% of total ore from the underground. Moving on to some upcoming catalysts.

We have a number of upcoming catalysts worth noting. Firstly, going forward, we expect to provide more regular underground exploration updates now that we have a third drill rig operating and dedicated to exploration.

We expect more opportunities for improvement as we complete the full potential assessment to unlock the latent capacity in the operations. We also expect to be commencing and announcing results of heritage surveys, which will hopefully be have some positive impacts on the Main Pit Push-Back project.

And over the next 12 months, we have a healthy pipeline of development and exploration catalysts to look for. The following slide is a quick summary of the analysts currently covering the stock, and our key shareholders and capital structure.

We are very encouraged by the support of some significant long-term funds and the analysts see a significant upside to our current share price. We also maintained a tight share structure with just 123 million shares outstanding.

Closing off, I would like to remind the listeners to our defined growth strategy -- a well-defined growth strategy. By continuing to deliver on our goals, we believe the company will revalue.

As a reminder, these goals are firstly to deliver a safe, stable and predictable operation between 70,000 and 85,000 ounces. And as I reported earlier, we've achieved that in 2021.

We are now moving on to building the business to an operational scope, firstly, targeting 100,000 ounces and then moving up to 150,000 ounces. This will ultimately also enable us to reduce costs, increase margin and therefore put the business in a position to strengthen its balance sheet further.

We will continue with our smart investment on exploration on known high potential targeted areas. We are focused on repositioning Plutonic for long-term success and unlocking shareholder value, and we encourage you to take another look at this opportunity.

With that, we conclude the presentation portion of the call. Operator, you can now open the line for questions.

Thank you very much.

Hi, Chris.

Hi, Pierre.

Just a point of clarification. 30% of production will be coming from new areas.

Can you maybe provide a little bit of color on what that means in terms of efficiency, productivity, cost wise? Your cost range is still somewhat high $1,300 to $1,450 in terms of guidance.

Is the new underground areas that are not so much affected by remnant mining, are they going to provide lower cost? Or is there some offsets there that just kind of levels out the overall cost in your guidance?

Yes. I think, firstly, what we are seeing, we are seeing a reduction in production costs from the underground on a per ton basis.

The grade seems to be holding up, if you look at our forecast for this year. So, we expect to get similar grades than we did in the previous year, but at increased tonnage.

So therefore, yes, we are seeing a drop in cost from a mining perspective. However, as I said in my clarification or comment on the price cost range, it's mainly influenced by the uncertainties that we have in so far as COVID is concerned.

As you know, Western Australia up to about 2 weeks ago, only reported about 10 to 15 new COVID cases over the whole state. That has increased markedly to north of 1,000 per day.

So, we are cautious, and I think quite rightly so, and the potential impact it will have with the availability of our people. We’ve also instituted a number of additional controls to make sure that we protect the operations and making sure that nobody gets on a plane flying off the site being contagious with COVID.

So, I think that's -- it's more the uncertainty around that's driving it. But insofar as our underground cost is concerned, we expect to drop as we increase our production.

As I said, last year, we did 835,000 tons of stope and development ore, this year we are targeting 900 with an exit rate of 1 million tons per annum.

So, can you speak to what your unit costs are in these new areas compared to remnant mining areas? And also, maybe how is this going to look going forward?

Is it going to be consistently 30% of production? Does it go higher from there?

Yes. So typically, we are operating between $90 and $110 per ton in 2021.

In 2022, we expect that to drop further down to between $80 to $100. So, we're seeing a movement towards the bottom end of that range on our open -- sorry, underground ore that we will be mining.

Okay. Okay.

So, bottom line is, if things improve on the COVID front, there's an ability to beat this cost guidance then? Is that the idea?

Well, I would certainly would like to see we are erring around the bottom end of that guidance. But you know it's very difficult to say.

WA is moving into, I think, unchartered territory for the state. I think there is some good guidance and experience from Victoria, New South Wales and Queensland as to how those states responded to the situation.

And we are literally taking that first step and response to COVID as we -- as the state dropped the requirements. I have to say on the other side, we also see that Stage 2 or Level 2 restrictions have been instituted at the same time.

So, there's a number of controls in so far as gathering of people wearing masks and so forth to try and limit that exposure as much as possible. I think in addition to that, we are also pushing hard for our employees.

In fact, all our employees and contractors now are double vaccinated. The important thing now is to get that booster jab.

And we’ve progressed some way down to get that done. We hope around April, May to have the largest portion of our employees triple vaccinated against COVID.

The benefit that we will see then as part of our mitigating steps, the benefits that we will see there is that if people do contract COVID, they would recover from it relatively quickly. And we will hopefully have no people that have to be taken up in a hospital.

Okay. Lastly, just remind me, what is the proportion of production from open pit production this year?

And could you provide a little more detail on the outlook timing on the Plutonic Main Pit beyond the heritage studies? Where is that going?

Right. So let me ask you first -- I will answer your first question.

So last year we were about probably close to a 50-50 blend open pit to underground. This year, we are going to 55% underground, 45% open pit.

As you can see, with the increase of underground, we are replacing lower grade open pit material with underground material. So -- that goes hand in hand with our strategy to increase the average mill grade in the processing plant.

And so far as the Main Pit Push-Back is concerned, I already mentioned that we are doing an early entry, which is called Main Pit Deeps, which will be one of the key supply fronts for this year. In addition to that, we will proceed with the -- pulling together the pre-feasibility study on the Main Pit Push-Back.

At this stage, it's not exactly clear how long that’s going to take to get through into production. My guess is between, I would say, 24 months to 36 months to get into full production on the open pit.

Okay. Thanks, Chris.

Thank you very much.

I have two questions. First, is the currency Canadian dollars or U.S.

dollars?

Good morning.

Hi.

The reported -- yes, we basically produced in Australian dollars because it's an Australian asset.

Yes.

The numbers that we’ve shown in this pack is in U.S. dollars unless otherwise stated.

So, the [technical difficulty] U.S?

Yes.

Okay. And I have to mark that down.

I wasn't sure. And are you looking outside Australia, say, Canada for properties?

Look, we will always consider options if it makes sense. At this stage, our strategy is focused on getting our own operations through this growth strategy.

I think parallel to that, and especially when we talk about the second mill, we would be looking at near mill options external to our business. But in essence, I can report, we haven’t specifically considered options in Canada at this stage.

Okay. Thank you.

I had an idea, but I will leave it.

You're welcome to bring it to my attention.

Thank you, ladies and gentlemen. Really appreciate you joining us today.

We are extremely pleased with the robust fourth quarter results, and it shows the company has returned to a state of significant cash flow. We will continue to advance on our strategic projects necessary to reposition Plutonic for sustainable and long-term success.

Now this includes fully optimizing the underground operation and incorporating new source of open pit fleet to increase our production levels, while further advancing our understanding of the extensions of the mineralization at Plutonic more specifically on the underground. We expect these improvements will drive continued improvement in our financial performance over the course of 2022.

Thank you once again for joining us today, and I wish you well. Thank you.